According to Tim Riddell, senior market strategist at Westpac, after ECB extended forward guidance and detailed their TLTRO program, Draghi acknowledged that further easing measures had been discussed, balancing that with policy normalisation.

Key Quotes

“The fact that such discussions took place has subsequently been repeated by other ECB officials. Next week’s annual ECB forum in Sintra could allow alternative policies to be aired, but with Draghi due to step down before year end, the profile is likely to err on continuity of policy.”

“Italy’s coalition seems to have found some common ground to act cohesively towards EU over their budget. This might allow survey and activity data to have more of an influence on EUR.”

“Trump’s threats of US sanctions over the oil pipeline from Russia to Germany may have caused EUR to pull back, but unless this escalates, the dynamics in CB policy differentials is actually skewed towards a more stable ECB and easing FOMC.”

“Unless Trump’s threats intensify or Italy becomes more irascible over its EU budget discussions, EUR/USD may well find support in the mid-1.12s and could squeeze into the upper half of its 1.11-1.16 range.”

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